Fund borrowed prior to commencement of business were deposited for short - term and Assessee Company earned interest thereon. It was claimed that such interest would go to reduce the capital; or interest so earned will be neutralized by interest payment on borrowed funds. Further, there is also no diversion of income by overriding title.
- Interest income is always of revenue character unless it is received by way of damages or compensation
- Whether interest payable on borrowed fund would be allowable or not would depend upon principles of law and not of accountancy, which cannot override section 56.
- Where assessee co. has not commenced its business, there cannot be any question of assessment of its profits and gain of business, its income from any other source will not be taxed.
- Where the company keeps the surplus fund in short term deposits in order to earn interest, but before commencement of business, such interest will be charged U/s 56.
- Income is something, which flows from the property. Something received in place of property will be a capital receipt.
[Followed I 232 ITR 554 (AP); 234 ITR 412 (SC); CIT -Vs - Coromondal Cement Ltd.240 ITR 24(Mad); 241 ITR 50 (Ker); 241 ITR 139 (Guj);247 ITR 228 (Guj);CIT - Vs- AUTO KAST LTD.; 248 ITR 110(SC)]

Entire business of a going concern, a firm, was sold to a company, which was formed fro this purpose to take over such going concern. Excess of sale price over W.D.V of assets (Whole value also included in the sale consideration) taken over by the new company is assessable. Difference between actual cost and W.D.V. is assessable as business income under section 41(2). Surplus over such difference is assessable as capital gains.
[Applied in - CIT - Vs Electric Control Gear Manufacturing Co 227 ITR 278 (SC); 235 ITR 21 (Mad)]

Extra shift allowance should be calculated on the basis of number of days during which concern has actually worked double shift or triple shift and not on the basis of number of days a particular plant & machinery had worked double or triple shift. [Followed in - Sundaram Spinning Mills - Vs - Cit 227 ITR 301; 235 ITR 327 (Mad); 238 ITR 683(Mad); 241 ITR 295 (Mad); 241 ITR 548 (Mad); 243 ITR 799(Mad)]

Assessee is a company in which public are not substantially interested. Additional tax on undistributed profits has to be levied as per section 104. However if 51% of total income of the Co. is attributed to manufacture of or processing of goods then exemption from additional tax will be available.
- Attributable means/implies that "for a result to be attributable to any thing it must be wholly or in material part caused by that thing ". A casual connection is necessary.
- For getting exemption under explanation to Section 104(4) the earning of income must be directly connected with the manufacturing or processing of goods. It is also necessary that material part of that income should have been earned by that activity.
- The word "attributable to " has a wider meaning than "derived from".
- The company carried on business of tanning hides and skins - more then 51 % of its income was earned by sale of chemicals imported on the strength of export of leather. Only 10% of goods exported by the co. were manufactured or processed by it. Its income is not attributable to manufacture or processing of goods the co. is not entitled to exemption under section 104(4)
- "Attributable to" means there should be a direct and proximate connection between the profit and gains and the business of the priority industry. (Section 80-l) (Vellore Electric Corporation Vs CIT 227 ITR 557 applied in 237 ITR 48 (Mad)
[Also relied in 253 ITR 725 (Del)]

Where there was material on record to show that ITO did not apply his mind for granting continuation of registration under Sec. 184 (7), the CIT would be justified in canceling the order under section 263.
[APPLIED IN - 241 ITR 297 (Mad)

While calculating capital gains, the amount of Estate Duty paid cannot be regarded as cost of acquisition or cost of improvement because assessee became the owner of the asset after the death of the deceased and his ownership is not subject to payment of Estate Duty- which is not a charge, discharging of which will create an interest in property. But where the property is put under mortgage by the previous owner and properly is inherited, along with debt, then discharge of mortgage by the assessee is cost of improvement or cost of acquisition and is liable for deduction from capital gains. [RELIED/APPLIED IN 227 ITR 240 (SC); 241 ITR 560 (Mad); 241 ITR 628 (Ker); 246 ITR 729 (Mad)]

Where 'assessee' created a debt on the property by mortgaging it, and later sold it with debt, then the amount of debt could not be said to be cost of acquisition or cost of improvement. This is different from Arunachalam's Case [ 227 ITR 222 (SC)] Where property passed on to the successor along with debt and what the successor acquired was only the interest of the owner. In the present case, the assessee himself created mortgage. To the buyer, discharge of debt, may be cost of improvement but not to the assessee.
[APPLIED IN 241 ITR 628 (Ker)]

MEANING OF WORD "DEVELOPMENT"
The word 'development' in section 10(20A) is of wide import. It is not confined to non-industrial activities such as roads, building, sanitation other civic amenities etc. There is nothing in the section to exclude industrial development. The development of a place can be accelerated through variety of schemes and establishment of industries is one of the modes of developing an area.
[FOLLOWED IN 255 ITR 199 (Raj)]

The guarantee commission paid by the assessee to the broker and the insurance company for the deferred payment of the purchase consideration of machinery is an admissible deduction under section 37 (1) of the Income Tax Act.
[FOLLOWED IN - 227 ITR 465 (SC); 235 ITR 264 (Guj); 236 ITR 436 (Guj); 241 ITR 412 (Mad); 242 ITR 290 (Guj0; 252 ITR 691 (Del); 259 ITR 122 (Guj)]

Subsidy received from Govt:- Payments from public funds such as refund of sales tax to assist assessee in carrying on trade or business are revenue receipts.
- The character of receipt of subsidy in the hands of the assessee will be determined on the basis of purpose for which subsidy is given. The source of fund is immaterial.
- If the purpose of subsidy is to help the assessee to set up its business or complete a project, the subsidy must be treated as capital receipt. But where the subsidy given to the assessee is for assisting him in carrying on his business operation an it is given only on the condition that production is commenced, such subsidies must be treated as assiance for the purpose of the trade and hence taxable.
- Capital subsidy may go to reduce the cost of the Plant & Machinery, if it is so specific. [Cited in 238 ITR 445 (Cal); 238 ITR 987 (Ker);240 ITR 106 (Mad); 245 ITR 09 (Cal); 245 ITR 478 (Mad); CIT Vs Rajram Maize Product 251 ITR 427(SC); 251 ITR 843 (Mad);]